Proved Validity Of Exponential Smoothing Moving Average (EXPMA) In China Stock Market

Technical analysis is one of the investment analysis methods, which use the historical information such as:securities prices, trading volume and so on to predict future price movements. After many years of application, technical analysis and fundamental analysis have been with two major investment styles in the financial markets, and technical analysis technical indicators are indispensable analytical tools. However, most ordinary investors have the failure experience of using technical indicators investment; therefore technical indicators are considered not as effective as described in the books, especially in emerging markets like China. How to prove its reliability in the Shanghai and Shenzhen stock market? How to properly use it to make stable profit? How to use technical indicators to form a complete trading strategy? All of the questions could be solved in this thesis.The most commonly used technical indicators exponentially smoothed moving average (EXPMA) has been selected as the object in this thesis and a lot of statistical analysis has been applied to approve the reliability of its trading point. The theoretical basis and mathematical algorithms of exponential smoothing moving average (EXPMA) have been introduced in the first part of this thesis. In order to make this conclusion fully convincing, more than 500pcs sample stocks have been extracted from Shanghai stock market during the last two years. In order to reduce systematic errors caused by sample condition setting as much as possible, the conditions and methods of sampling have been strictly defined.On the basis of a large number of valid data and comparing with profit and loss rate of exponential smoothing moving average (EXPMA) under the condition of different parameter settings as well as buy-hold situation, a maximize returns could be found with optimized the parameter settings. Meanwhile time period has been analyzed for each transaction in order to calculate and find out the correlation between time periods. Furthermore a set of complete transactions strategy based on exponential smoothing moving average (EXPMA) including the open position, increase position, decrease position, close position setting and position control, financial management etc., and transaction costs and psychological factor are also taken into account. This process fully simulates the real situation, and testing the result with the sample stocks. To confirm that the simple technical indicators is the most reliable for ordinary investors to make a stable income in China's stock market.